PSLCts  Figures  wit^h  reTerence 
"fe 

U.5.  "Railroads 


Return  this  book  on  or  before  the 
Latest  Date  stamped  below. 


University  of  Illinois  Library 


SEC  161355 


1 9 ;384 

s w 


1,161—114  1 


svuppu  cy  u\A  -y-t/  ^ ‘>^ 


52  5 .1  3 G 
B4^G  ^ 


Opening  of  Railroads. 


Railroads  were  opened  in  the  United  States  between  1830 
and  1835.1 

They  were  regarded  as  ex[)eriinental  till  about  1840.  In 
1835  the  four  leading  engineers  of  New  York,  in  a report  to 
the  Legislature,  said  : — 

Railroads  admit  of  advantageous  use  in  districts 
where  canals,  for  want  of  water,  wot’  ’ ’ 


They  would  probably  be  preferred  vfla^^E  jU^liyejJicities 
are  required,  and  for  the  transportation  of  passengers. 


and  under  some  circumstances  for  the  conveyance  of 
light  goods.” 


In  1839  Boston  had  only  167  miles  of  railroad  leading 
from  it.  In  1840  there  were  only  2,818  miles  in  the  United 
k5tates,  of  which  but  517  w^ere  in  New  England. 


The  average  cost  per  mile  of  these  railroads  and  their 
equipment  vvas  about  $20,000.  The  average  speed  of  pas- 
senger trains  was  from  twelve  to  fifteen  miles  an  hour.  The 
average  passenger  fare  was  five  cents  a mile,  and  the  average 
charge  on  freight  about  one  dollar  per  ton  per  mile.^ 


As  late  as  1842,  the  inhabitants  of  Dorchester,  Mass., 
strenuously  opposed  the  construction  of  a railroad  through 
that  town,  saying  in  their  Town  Meeting  resolutions  against 
it  that  it  “ will  be  of  incalculable  evil  to  the  town  generally 


in  addition  to  the  manifest  sacrifice  of  private  property  which 


will  be  involved.” 


1 A railroad  was  opened  in  South  Carolina  in  1830,  in  New  Jersey  and  Mary- 
land in  1831,  in  New  York  in  1833,  and  in  Massachusetts  in  March,  1834,  At 
first  they  were  operated  by  horse  power,  although  the  cars  on  the  first  South 
Carolina  road  were  propelled  by  sails. 

2 Poor’s  Manual,  1890;  Tanner  on  Railroads,  p.  22. 


2:75 


2 

Other  communities  made  similar  opposition  to  railroad 
construction. 

In  1851,  upon  the  opening  of  railroad  communication 
between  Boston  and  Montreal,  the  railroad  connections  of 
Boston  had  increased  to  nearly  3,500  miles,  of  which  2,830 
miles  were  in  New  England,  and  about  one  half  in  Massa- 
chusetts. Boston  railroad  investments  were  then  estimated 
to  exceed  $50,000,000,  much  of  which  was  in  railroads  out- 
side of  New  England.^ 

In  1893  the  Atchison  Railroad  alone  reported  gross  earn- 
ings of  more  than  fifty  millions  of  dollars  f $50,733,705) . 

. » f.*‘  * 

Railroad  Mileage. 

During  the  year  ending  June  30,  1892,  there  were  1,822 
railroad  corporations  in  the  United  States,  and  of  these  only 
712  were  independent  operating  companies,  which  practi- 
cally operated  the  entire  mileage  upon  which  all  statistics  of 
operations  are  based. 

This  mileage  amounted  at  the  close  of  the  year  to  171,564 
miles  of  railroad,  which  was  only  3,161  miles  more  than  at 
the  close  of  the  previous  year,  and  was  nearly  one  half  of  the 
railroad  mileage  of  the  world. 

The  distribution  of  the  railroad  mileage  of  the  United 
States  according  to  population  and  territoiy  is  very  sugges- 
tive, especially  when  compared  with  a similar  distribution  in 
other  countries. 

The  United  States  as  a whole  has  5.67  miles  of  railroad 
as  against  3.62  miles  in  Europe  for  each  one  hundred  square 
miles  of  territory. 

There  are  in  the  United  States  26.29  miles  of  railroad  as 

' Report  City  Engineer,  Sept.  17, 1851. 

2 In  1890  there  were  385,191  miles  of  railroad  in  the  world.  The  total  length 
of  single  track  in  the  United  States  was  something  [over  200,000  miles. 


276 


»> 

»> 

against  3.84  miles  in  Europe,  for  each  ten  thousand  inhabi- 
tants.^ 

No  country  in  Europe  has  ten  miles  of  railroad  for  each 
ten  thousand  inhabitants  except  Sweden. 

The  only  European  countries  which  have  ten  miles  of  line 
for  each  one  hundred  square  miles  of  territory  are  Germany 
with  12.44  miles,  Great  Britain  with  16.42,  France  with 
11.06,  Belgium  with  28.23,  Holland  with  13.73,  and  Switzer- 
land with  12.10  miles,  being  an  average  for  these  six  coun- 
tries of  15..66i  miles  for  each  one  hundred  square  miles. 

It  is,  of  course,  to  be  expected  that  as  compared  with 
Germany,  France,  Great  Britain,  Austria-Hungary  and 
Italy,  that  is,  with  the  more  thickly  settled  portions  of 
Europe,  the  mileage  of  the  United  States  as  a whole  will 
be  much  the  greater  according  to  territory  ; and  we  find  that 
Germany  has  12.87  miles,  France  11.27,  Great  Britain  and 
Ireland  16.57  miles,  Austria-Hungary  6.60  miles,  and  Italy 
7.40  miles  per  hundred  square  miles  of  territory,  as  against 
5.67  miles  in  the  United  States  as  a whole. 

But  even  the  Eastern  portions  of  the  United  States  have  a 
greater  mileage  according  to  territory  than  any  European 
country.  In  Massachusetts  there  are  twenty- six  miles,  in 
Connecticut  20.77  miles,  in  New  Jersey  27.71  miles,  in  New 
York  16.19  miles,  in  Pennsylvania  22.27,  in  Rhode  Island 
20.39  miles,  and  in  Illinois  18.25  miles  per  one  hundred 
square  miles  of  territory. 

It  thus  appears  that  the  United  Slates,  either  with  refer- 
ence to  population  or  territory,  is  much  better  provided 
with  railroad  facilities  than  Europe,  and  that  its  railroads, 
even  in  the  most  populous  States,  depend  for  their  business 

These  figures  include  in  area  only  the  land  surface,  and  exclude  Alaska,  and 
are  on  a basis  of  64,051,571  population,  which  covers  an  estimated  increase  for 
1891  of  1,250,000  over  the  census  of  1890,  and  excludes  Alaska. 


277 


4 

and  earnings  upon  a much  smaller  population  and  territory 
proportionately  than  the  railroads  of  Europe. 

The  distribution  of  the  railroad  mileage  of  the  United 
among  the  different  States,  throws  some  light  upon  the  com- 
parative earning  capacity  and  value  of  railroads  in  the  dif- 
ferent States. 

Rhode  Island  has  6.28  miles  of  line  as  against  102.82  in 
Colorado,  110.28  in  Idaho,  and  199.}  in  Nevada,  for  each 
ten  thousand  inhabitants  ; Massachusetts  has  only  9.15  miles 
of  railroad  as  against  38  in  Texas,  42  in  Minnesota,  43  in 
Iowa,  45  in  Oregon,  58  in  Utah,  59  in  Washington,  60  in 
the  Indian  Territory,  and  61  miles  in  Kansas,  for  each  ten 
thousand  inhabitants. 

Indiana  and  Illinois  have  each  more  miles  of  railroad  per 
one  hundred  square  miles  of  territory  than  New  York,  and 
Ohio  a greater  mileage  in  proportion  to  its  area  than  Penn- 
sylvania. Iowa  has  nearly  as  great  a mileage  per  one  hun- 
dred square  miles  as  Delaware,  while  Kansas  and  Wisconsin 
have  each  substantially  as  many  miles  in  proportion  to  their 
area  as  either  Vermont  or  Maryland. 

Capital  and  Debt. 

In  1892  the  capital  and  debt  (exclusive  of  current  accounts, 
or  floating  liabilities  not  bearing  interest,  which  amounted 
to  nearly  $250,000,000)  of  the  railroads  of  the  United  States 
was  $10,669,998,317,  or  $368,958,940,  more  than  the  total 
assessed  value  of  all  the  real  and  personal  property  in  1890 
in  the  States  of  Massachusetts,  New  York,  Ohio  and  Pennsyl- 
vania, and  $554,568,540  more  than  the  total  assessed  valua- 
tion of  the  real  and  personal  property  of  the  States  of  Ohio, 
Indiana,  Illinois,  Michigan,  Wisconsin,  Minnesota,  Iowa, 
Missouri,  North  Dakota,  South  Dakota,  Nebraska,  Kansas 
and  Pennsylvania  in  that  year. 


27S 


This  capital  and  debt  was  represented  by  $4,920,555,225 
of  stock,  $5,463,611,204  of  bonds,  and  $285,831,888,  of 
other  forms  of  interest  bearing  indebtedness  J 

The  indebtedness  alone  was  substantially  as  much  as  the 
entire  valuation  of  the  States  of  New  York  and  Pennsylvania. 

During  the  year  1890  the  railroad  capital  was  increased 
$538,069,281,  at  least  $250,000,000  of  which  was  due  to 
the  increase  of  capital  on  existing  railroad  lines. ^ 

In  1891  it  w'as  increased  $392,131,595,  a considerable  por- 
tion of  which  was  issued  by  lines  already  in  operation.^ 

This  stock  increase  on  existing  lines  is  doubtless  to  be 
largely  accounted  for  by  necessary  expenditures  upon  ter- 
minal roads  for  the  accommodation  of  increasing  business,  but 
a portion  of  it  probably  represents  stock  issued  to  pay  debt 
and  for  other  purposes  than  railroad  construction. 

The  average  rate  of  interest  paid  upon  the  bonded  indebt- 
edness of  railroads  in  the  United  States  is  4.25  per  cent ; the 
average  rate  paid  upon  all  indebtedness  is  4.05  per  cent ; the 
average  rate  of  dividend  paid  upon  stock  is  1.68  percent, 
while  the  average  rate  of  interest  and  dividends  is  2.96  per 
cent. 

If  it  be  assumed  that  one  half  of  the  stock  represents  no 
actual  value,  or  money  paid,  and  therefore  the  dividends 
should  be  averaged  upon  only  one  half  of  the  stock,  then  the 
average  dividend  paid  would  be  3.36  per  cent.  The  value 
of  rights  to  subscribe  at  par  for  stock,  which  was  worth 
more,  should,  perhaps,  be  added  to  the  dividends,  but  such 
rights  really  add  nothing  to  the  value  of  the  shareholders’ 
property,  and  besides  they  were  given  in  comparatively  so 
few  cases  that  if  their  value  could  be  fairly  ascertained  it 
would  not  appreciably  increase  the  average  rate  of  dividend. 


^ Poor’s  Manual,  1893,  page  13. 

2 luter-State  Commerce  Commission  Statistics,  1890,  page  45. 

3 Inter-State  Commerce  Commission  Statistics,  1891,  p.  57. 


6 


o 7 (.V 


And  if  we  take  into  account  the  fact  that,  in  the  case  of  roads 
being  constructed,  interest  and  dividends  are  in  many  cases 
paid  to  a greater  or  less  degree  from  the  proceeds  of  sale  of 
stock  and  bonds,  the  average  income  on  railroad  investments, 
reckoning  the  stock  at  one  half  its  amount,  is  less  than  3.25 
per  cent. 

Eailroai)  Earnings. 

The  assessed  value  of  all  the  property  of  the  United  States 
in  1890  was  $24,651,535,465,  and  yet  a tax  of  one  and  a 
half  per  cent  upon  this  vast  sum  would  have  been  less  than 
one  third  of  the  gross  earnings  of  the  railroads  for  that  year. 

During  the  year  ending  June  30,  1892,  the  railroads  of 
the  United  States  earned  from  operation  $1,171,407,343, 
of  which  thirty  and  thirty-seven  one  hundredths  per  cent 
was  from  passenger  service,  and  sixty-seven  and  forty-five 
one  hundredths  per  cent  from  freight. 

This  was  more  than  three  times  the  entire  revenue  of  the 
United  States  fiom  internal  revenue  taxes  and  customs,  and 
nine  times  as  much  as  the  total  revenue  from  taxation  and 
other  sources  of  all  the  States  and  Territories  in  1890.  It 
was  $36,196,901  more  than  the  entire  State,  county,  muni- 
cipal and  school  district  indebtedness  of  the  United  States 
in  1890,  and  $279,447,239  more  than  the  national  debt  of 
the  United  States  at  that  time. 

The  o-ross  earnino:s  of  the  railroads  of  the  United  States 

c cr 

for  the  years  1891  and  1892  would  have  paid  the  entire 
Slate,  county,  munici})al,  school  district  and  national 
indebtedness  of  the  United  States  in  1»90  and  left  a surplus 
of  $240,998,192. 

The  companies  paid  out  of  their  gross  earnings,  in  1892, 
$780,997,996  for  expenses  of  maintenance  and  operation, 
leaving  a net  income  applicable  to  fixed  charges  and  to  divi- 
dends of  $390,409,347. 


280 


7 

The  net  income  applicable  to  dividends  (including  $141,- 
960,782  income  from  other  sources  than  operation)  was 
$115,965,191.  The  amount  paid  in  dividends  was  $97,614,- 
745,  and  to  sinking  funds  and  in  other  payments  from  net 
income,  $4,314,390,  leaving  a surplus  over  operations  for  the 
year  of  $14,036,056,  or  thirteen  one  hundredths  of  one  per 
cent  on  the  capital  and  debt  of  the  companies. 

The  narrow  margin  of  profit  upon  which  these  net  earnings 
depend  is  shown  by  the  fact  that  an  increase  of  eight  one 
hundredths  of  a mill  per  ton  per  mile  on  the  freight  business 
of  1892  added  over  $7,000,000  to  the  income  of  that  year, 
while  a reduction  of  one  tenth  of  a mill  per  mile,  or  one 
cent  on  each  one  hundred  miles  in  the  passenger  rate  of  that 
year,  would  have  reduced  the  net  earnings  of  the  railroads 
$1,336,289,  and  a similar  reduction  on  the  charge  for  freight 
would  have  reduced  the  net  earnings  $8,824,105. 

A reduction  of  one  hundred  and  eleven  thousandths  of  a 
cent  per  ton  per  mile  on  the  freight  carried  would  have  wiped 
out  all  the  dividends  paid,  while  a reduction  of  three  hun- 
dred and  sixty-nine  thousandths  of  a cent  per  ton  per  mile 
would  have  rendered  the  railroads  not  only  unable  to  pay 
dividends  but  unable  to  pay  any  interest  upon  their  indebt- 
edness, and  a reduction  of  six  mills  per  ton  per  mile  would 
have  reduced  their  gross  earnings  from  freight  and  passen- 
gers below  their  operating  expenses. 

Passengers  and  Freight. 

During  the  year  ending  June  30,  1892,  the  railroads  of 
the  United  States  carried  560,958,211  passengers,  and 
706,555,471  tons  of  freight. 

The  average  distance  travelled  by  passengers  was  23.82 
miles,  and  the  average  number  of  passengers  per  train,  for 
each  mile  run,  was  only  forty-two. 


8 


The  average  haulage  per  ton  of  freight  was  124.89  miles, 
while  the  average  number  of  tons  per  train  for  each  mile  run 
was  181.79. 

The  passenger  train  mileage,  that  is,  the  number  of  miles 
run  by  passenger  trains,  was  317,538,883,  while  the  passen- 
ger mileage,  or  number  of  passengers  carried  one  mile  was 
13,362,898,299. 

The  freight  train  mileage,  or  number  of  miles  run  by 
freight  trains,  was  485,402,369,  while  the  freight  mileage, 
or  number  of  tons  carried  one  mile,  was  88,241,050,225. 

Estimated  at  $25  a ton,  the  value  of  the  freight  moved  by 
the  railroads  of  the  United  States  in  1892  was  more  than 
$17,664,000,000,  or  over  two  and  a half  times  the  value 
of  the  entire  exports  and  imports,  in  1889,  of  France,  Ger- 
many, and  Great  Britain,  and  nearly  eleven  times  as  much 
as  the  value  of  the  entire  exports  and  imports  of  the  United 
States  in  that  j^ear.’ 

And  yet  this  vast  system  of  internal  railroad  transporta- 
tion brings  the  products  of  the  West  to  the  sea-board  only 
to  transfer  all  of  them,  substantially,  to  ocean  transporta- 
tion controlled  by  other  nations. 

In  1859  there  were  but  hfty-six  American  steamships, 
with  a tonnage  of  158,000  tons,  and  represented  by  a capital 
of  only  $15,000,000,  engaged  in  international  commerce, 
while  the  merchant  fleet  of  England  alone  comprised  5,196 
steamers,  with  a tonnage  of  7,000,500  tons,  and  was  repre- 
sented by  a capital  of  $1,100,000,000. 

In  the  year  1888,  the  United  States  paid  for  freights  in 
foreign  vessels  $170,00(),000  and  only  $29,000,000  for 
freights  in  vessels  sailing  under  its  own  flag.^ 

1 Mullhall  Diet.  Statistics,  page  138. 

2 Since  1873,  when  the  United  States  abandoned  subsidies  to  shipping,  Eng_ 
land  has  paid  over  $225,000,000  in  subsidies  to  its  vessels  engaged  in  foreign 
trade. 


9 


Reduction  of  Rates. 

The  reduction  of  railroad  fares  and  freights  on  the  rail- 
roads of  the  United  States  has  been  constant  for  many 
years. 

In  1882  the  passenger  mileage  (u  e.,  the  number  of  pas- 
sengers carried  one  mile)  was  7,688,468,538.  In  1892  it 
was  13,697,343,804,  or  an  increase  of  seventy-eight  per 
cent  in  the  ten  years.  The  average  rate  per  mile  in  1882 
was  2.447  cents.  In  1892  it  was  2.143  cents,  or  twelve 
per  cent  less.  This  percentage  of  reduction  applied  to  the 
business  of  1892  would  amount  to  $35,226,896. 

While  this  reduction  is,  perhaps,  no  more  than  could  be 
expected  from  the  great  increase  in  the  volume  of  business 
and  the  improvement  in  labor-saving  appliances  and  in- 
creased efficiency  and  economy  of  management  resulting  from 
the  union  of  lines,  the  reduction  which  would  otherwise  have 
resulted  from  these  causes  has  been  largely  prevented  by  the 
increased  demands  which  the  passenger  business  continually 
makes  for  more  expensive  roads,  terminals  and  service. 

The  reduction  in  freight  rates,  however,  has  been  much 
greater.  In  1882  the  freight  tonnage  (?'.  e.,  the  number  of 
tons  moved  one  mile)  was  39,202,209,249.  In  1892  it  was 
84,448,197,130,  or  an  increase  of  115  per  cent.  In  1882 
the  average  rate  per  ton  per  mile  was  1.236  cent-.  In  1892 
the  average  rate  was  .967  of  a cent,  or  22  per  cent  less. 
This  percentage  of  reduction  applied  to  the  business  of  1892 
would  amount  to  $179,677,687.  If  the  same  rate  had  been 
paid  upon  the  freight  business  of  1892  that  was  paid  upon  the 
freight  business  of  1882,  the  owners  of  the  railroads  would 
have  received  substantially  $180,000,000  more  than  they  did 


receive. 


10 


o t; 


The  avernge  charge  per  ton  per  mile  for  freight  on  the 
leading  trunk  railroads  of  the  United  States  decreased  from 
1.226  cents  in  1868  to  .527  of  a cent,  or  more  than  one  half, 
from  1868  to  1883.  During  that  time  the  rate  on  the  New 
York  Central  decreased  from  1.371  cents  to  .45  of  a cent, 
and  the  rate  on  the  Boston  & Albany  decreased  from  1.405 
of  a cent  to  .59  of  a cent. 

The  rate  on  the  Chicago  & Northwestern  decreased  from 
1.22  cents  to  .41  of  a cent,  and  the  rate  on  the  Lake  Shore 
8c  Michigan  Southern  decreased  from  1.668  cents  to  .36  of  a 
cent. 

This  large  reduction  was  rendered  possible  only  by  the 
enormous  increase  in  business. 

The  freight  of  the  New  York  Central  increased  from 
1,846,599  tons  in  1868,  to  10,892,440  tons  in  1883,  and  the 
freight  carried  by  the  Pennsylvania  increased  during  the 
same  period  from  4,722,015  to  21,674,160  tons  per  annum. 

The  effect  of  this  enormous  reduction  in  freight  transpor- 
tation upon  American  railroads  is  thus  stated  by  Mr.  Jeans, 
the  highest  English  authority  upon  this  subject,  who,  speak- 
ing of  it  in  1887,  said  : — 

“ This  colossal  concession  to  Ihe  trade  and  industiy  of 
America  has  had  both  immediate  and  far-reaching  conse- 
quences. Its  more  immediate  effects  have  been  to  enable 
the  remotest  cattle-breeder  and  wheat-grower  in  the 
United  States  to  obtain  access  to  other  markets  than  his 
own,  and  thereb}’  to  enter  into  the  world’s  competition  for 
the  supply  of  the  world’s  markets.  Its  ultimate  results 
are  to  be  witnessed  in  the  extraordinaiy  cheapness  of  the 
bread  stuffs  furnished  to  England  b}^  the  United  States, 
and,  as  a necessary  consequence  thereof,  ly  other  coun- 
tries ; in  the  singularly  severe  and  protracted  depression 
of  British  agriculture,  and  in  the  complete  discomfiture 
of  man}'  interests  that  were  fairly  strong  and  capable  of 


11 


284 


lioUHng  their  own  until  this  fiscal  monster  came  to  the 
front.” 

Jeans  Railway  Problems,  page  318. 

A part  of  this  reduction  is  doubtless  fairly  due  to  the 
great  increase  of  the  volume  of  business  and  to  improved 
efficiency  and  economy  of  operation  ; but  much  is  due  to  un- 
wise and  ruinous  competition,  which  has  reduced  the  charge 
for  freight  carriage  in  many  instances  below  its  fair  cost. 
That  this  rate  of  reduction  in  freight  rates  will  continue,  or 
that  the  present  excessively  low  average  rate  can  be  main- 
tained, cannot  reasonably  be  expected,  with  proper  regard 
to  a reasonable  return  upon  the  actual  value  of  railroad 
property,  and  proper  compensation  to  railroad  labor. 

Rates  in  United  States  and  in  Europe. 

A comparison  of  railroad  rates  in  the  United  States  with 
the  rates  in  Europe  is  instructive.  The  average  passenger 
rate  in  Europe,  including  Great  Britain,  is  1.93  cents  per 
mile.  The  average  rate  in  the  United  States,  is  2.143  cents 
per  mile. 

If  the  passenger  business  of  the  United  States  in  1892 
had  been  done  at  the  European  rates  the  owners  of  the  rail- 
roads would  have  received  $29,198,741  less  than  they  did 
receive. 

The  European  rate,  however,  is  subject  to  the  different 
classifications  of  travel,  the  larger  portion  of  the  travel 
being  third  class  who  are  carried  at  a very  low  cost  and,  as 
a rule,  furnished  with  quite  inferior  accommodations.  Last 
year  the  first-class  passengers  on  all  the  railways  of  the 
United  Kingdom  paid  3.12  millions  of  pounds  sterling,  the 
second-class  2.37  millions,  and  the  third-class  22.21  millions 
of  pounds  sterling.  In  other  words,  of  the  receipts  for 


12 


ordinary  passenger  fares,  80.3  per  cent  came  from  passengers 
travelling  third  class,  8.5  per  cent  from  those  by  second 
class,  and  11.2  per  cent  from  first  class. 

But  when  we  come  to  the  difierence  between  freight  rates 
in  the  United  States  and  freight  rates  in  Europe  we  find  that 
the  average  rate  in  the  United  States  is  .967  of  a cent  as 
against  2.02  cents,  or  more  than  twice  as  much,  in  Europe. 

If  the  railroads  of  the  United  States  had  been  paid  the 
same  rate  for  freight  in  1892  which  was  paid  in  Europe, 
they  would  have  received  $889,136,823,  or  a sum  suflficient 
to  pay  the  whole  present  national  debt,  more  than  they  did 
receive.  In  considering  this  difference  in  freight  rates,  how- 
ever, it  should  be  remembered  that  Europe  has  great 
facilities  for  water  transportation,  not  only  on  natural  but 
on  artificial  water  ways,  and  a smaller  proportion  of  the  low 
class  freight  is  probably  moved  by  rail  there  than  in  the 
United  States. 

The  rates  on  British  railways  have  not  fallen  to  any  ap- 
preciable extent  for  many  years. 

In  1844  Parliament  required  that  at  least  one  train  a day 
should  be  run  at  a fare  of  one  penny  (equal  substantially  to 
two  cents)  per  mile  for  passengers.  A penny  is  still  the 
standard  fare  for  a third  class  passenger.  The  passenger 
undoubtedly  has  better  accommodations  than  in  1845.  In- 
stead of  being  limited  to  one  train  a day  he  can  travel  by 
nearly  every  train.  He  is  carried  at  a higher  rate  of  speed 
and  has  better  station  and  railway  accommodations,  but  he 
must  still  pay  the  same  rate  that  was  paid  more  than  forty 
years  ago. 

It  is  impossible,  owing  to  the  lack  of  statistics,  to  make 
an  exact  comparison  between  the  rates  for  freight  on  British 
railways  thirty  or  forty  years  ago  and  the  present  rates,  but 
the  best  English  authorities  state  unqualifiedly  that  it  is  cer- 


286 


13  . 

tain  that  on  the  whole  no  material  redaction  has  taken  place 
in  those  rates  since  1868,  and  probably  none  for  a still  longer 
period.^ 

Kailroad  Labor. 

In  1891,  the  railroads  of  the  United  States  employed 
directly  784,285  persons,  mostly  men,  and  it  was  estimated 
that  independently  of  stock  and  debt  holders  they  provided 
a living  for  at  least  three  million  persons,  or  about  one  in 
twenty-two  of  the  total  population  of  the  country.^ 

It  is  doubtless  safe  to  say  that  to-day  one  person  in  twenty 
of  the  entire  population  of  the  United  States  is  dependent 
for  his  living  upon  the  labor  of  those  employed  in  the  main- 
tenance and  operation  of  its  railroads.^ 

This  labor  is  so  efficient  and  so  well  organized  and  di- 
rected that  only  four  hundred  and  seventy-nine  persons  are 
required  per  one  hundred  miles  of  line  operated,  while  in 
England  1,748  persons  per  hundred  miles  are  required. 

In  considering  this,  however,  regard  should  doubtless  be 
had  to  the  density  of  population,  and  larger  volume  of  busi- 
ness per  mile  on  the  English  roads  and  it  should  be  observed 
that  on  the  New  England  roads  the  number  of  enqiloyees 
per  hundred  miles  is  eight  hundred  and  nine,  and  on  those 
of  the  middle  States  1,141.^ 

Something  is  also  doubtless  due  to  superior  labor-saving 
appliances,  but  in  any  aspect  of  the  case  it  must  certainly  be 
said  that  the  laborers  who  operate  the  railroads  of  the  United 
States  are  most  faithful  and  efficient. 

Railroad  labor  is,  however,  much  better  paid  in  the  United 

^ Hunter  on  Railway  Rates,  p.  4. 

2 Interstate  Com.  Statistics,  1889,  p.  16. 

3 This  does  not  include  employees  of  express  and  parlor  car  companies. 
The  express  companies  alone  employ  47,014  persons. 

^ Interstate  Com.  Com.  Report,  1891,  p.  52. 


14 


States  than  in  Europe.  In  England,  railway  companies  are 
regarded  as  the  best  employers  of  labor,  and  there  is  a grow- 
ing tendency  of  railway  employees  there  to  bring  up  their 
children  in  the  same  employment.  ^ 

The  average  working  time  on  the  English  railways  is 
eleven  hours  a day,  although  in  some  departments  twelve, 
fourteen  and  fifteen  are  required. 

The  following  table  shows  the  daily  wages  paid  by  the  three 
largest  and  best  paying  English  railway  companies  : — ^ 


Great  Western' 

London 
& N.W, 

Midland. 

Lowest  rate. 

Highest  rate. 

Lowest  rate. 

Highest  rate. 

Lowest  rate. 

Highest  rate. 

Drivers  (engineers’)  and  firemen 

$0  75 

$2  00 

$0  75 

$2  00 

$0  83 

$1  88 

Passenger  guards  (conductors) 

75 

1 25 

75 

1 38 

83 

1 16 

Goods  guards  (freight  conductors) 

79 

1 33 

91 

1 35 

83 

1 1 25 

Shunters  (switchmen) 

66 

1 25 

75 

1 25 

57 

1 29 

Signalmen 

63 

1 16 

83 

1 25 

79 

i 1 16 

Passenger  porters 

50 

8S 

50 

97 

35 

83 

Goods  porters 

57 

1 20 

63 

1 13 

57 

1 00 

Plate-layers 

58 

1 25 

66 

1 10 

66 

1 08 

Draymen  or  carmen 

83 

91 

75 

1 04 

70 

1 00 

The  hiijhest  and  lowest  wages  are  here  given  each  class. 
A fair  average,  however,  would  include  many  more  in  the 
lower  than  the  higher  classes. 

On  the  Continent,  wages  of  railroad  employees  are  on  the 
whole,  lower  than  in  England. 

The  following  table  shows  the  average  daily  wages  paid 
by  the  New  York,  New  Haven  & Hartford  Railroad,  and  the 
Pennsylvania  Railroad,  on  which  the  wages  are  probably  as 
high  as  those  paid  on  any  other  United  States  roads  : — 


1 The  English  railway  companies  employ  about  350,000  men,  of  whom  some 
30,000  are  members  of  the  Amalgamated  Society  of  Railway  Servants. 

2 Masses  and  Classes,  Tuckley,  p.  85. 


28S 


15 


N. 

Y.,  N.  H.  & H.  R.  R. 

£'( 

•nn.  R.  R. 

Passenger  engineers 

$4 

64  ) 

$3  77 

Freight  engineers 

4 

05  > 

Passenger  firemen 

2 

CO 

CO 

1 99 

Freight  firemen  . 

2 

09  > 

Passenger  conductors  . 

3 

66  > 

3 28 

Freight  conductors 

3 

o 

o 

Passenger  brakernen 

1 

90  ) 

1 86 

Freight  brakernen 

1 

92  > 

Switchmen  . 

1 

77  . 

. 

1 64 

By  this  comparison,  which 

is  probably 

as  fair  as  any 

which 

can  be  made,  it  appears 

that 

the  wages 

paid  on  the  United 

States  roads  are  about  twice 

as  large  as  those  paid 

on  the 

English  roads. 

In  the  United  States  it  is  estimated  that  about  fifty-five 
per  cent  of  the  expense  of  the  maintenance  and  operation  of 
railroads  is  paid  in  wages  to  those  who  directly  maintain  and 
operate  the  roads.  But  if  we  take  into  account  the  wages 
paid  to  those  who  build  cars  and  engines,  machinery  and 
other  appliances,  make  the  rails,  mine  the  coal,  prepare  the 
ties,  refine  the  oil,  and  otherwise  labor  to  produce  the 
materials  and  supplies  used  in  the  maintenance  and  opera- 
tion of  the  railroads,  it  is  safe  to  say  that  nearly  ninety 
per  cent  of  the  total  cost  of  maintenance  and  operation  is 
paid  for  labor.  This  means  a payment  of  substantially 
$700,000,000  each  year,  or  about  $2,000,000,  each  twenty- 
four  hours. 

Value  of  Railroads. 

It  is  obvious  that,  taken  as  a whole,  the  amount  of  capital 
and  debt  of  the  railroads  does  not  show  their  actual  value. 
But  if  the  rates  received  by  them  are  on  the  whole  reason- 
able, their  present  value  is,  perhaps,  as  well  shown  by  the 


16 


28 


(_> 


amount  of  their  net  earnings  at  those  rates,  as  it  can  be  in 
any  other  way. 

In  applying  this  method  of  valuation  regard  should  be 
had  to  the  fact  that  net  earnings  are  sometimes  increased  by 
the  payment  of  operating  expenses  from  proceeds  of  stock 
and  bonds  and  thus  the  earning  power  of  the  roads  shown  to 
be  greater  than  it  really  is.  But  as  it  is  impossible  to  esti- 
mate this  with  any  degree  of  accuracy,  it  must  be  disre- 
garded in  actual  computations. 

If  it  be  assumed  that  the  n6t  earnings  of  all  the  roads,  as 
shown  by  their  accounts,  are  from  railroad  service  performed 
and  not  in  any  degree  aflected  by  the  application  of  the  pro- 
ceeds of  stock  or  bonds  to  expenses,  the  earnings  in  1892 
amounted  to  five  per  cent  upon  a capital  of  $7,808,186,940, 
or  $2,861,811,377  less  than  the  actual  capital  of  the  railroad 
companies  at  that  time.^  ^ 

Upon  this  basis,  which  doubtless  gives  to  the  railroads  a 
higher  earning  power  than  they  actually  have,  it  would  be 
necessary  to  destroy  more  than  one  half  of  the  entire  capital 
stock  to  secure  to  owners  of  the  remainder,  and  to  the  debt 
holders,  five  per  cent  upon  their  investments. 

These  figures  take  no  account  of  the  stock  and  debt  which 
have  been  destroyed  by  the  failure  of  railroad  companies  and 
the  foreclosure  of  mortgages  upon  their  property,  nor  of  the 
unpaid  interest  account  upon  money  actually  invested  in  such 
stock  debts  before  they  were  actually  destroyed,  or  since. 
This  would  decrease  the  net  earnings  of  the  roads  and  the 
return  upon  their  cost  to  a much  lower  figure.  In  any 
aspect  of  the  case  the  net  return  upon  railroad  capital  as  a 
whole  has  been  very  small.  Fictitious  capital  has  been 
created,  but  actual  capital  has  been  lost. 

In  considering  the  question  of  railroad  rates  and  of  return 


Interstate  Com.  Statistics,  1890,  p.  58. 


290 


17 

upon  railroad  investments,  the  public  naturally  consider  the 
first  more  than  the  latter,  but  in  any  fair  consideration  of  the 
subject  both  should  be  taken  into  account. 

Those  who  have  gained  by  the  one,  are  in  the  main  those 
who  nave  lost  by  the  other. 

The  man  who  has  received  a high  rate  of  interest  and  has 
doubled  his  shares  without  corresponding  payment  in  the 
stock  of  one  road,  may  have  wholly  lost  his  investment 
in  another.  If  his  profit  in  the  one  is  to  be  taken  into 
account,  should  not  his  loss  in  the  other  also  be  considered? 

Railroad  Consolidation. 

With  a few  recent  exceptions,  the  uniform  course  of  gen- 
eral legislation  in  the  United  States  has  been  to  stimulate 
the  construction  of  competing  lines  and  prevent  the  union 
of  railroads,  especially  of  those  which  are  competitors. 

Most  of  the  States  have  strinojent  laws  aofainst  the  union 
of  competing  lines  in  any  form,  and  nine  States  have  in- 
cluded similar  provisions  in  their  constitutions ; and  yet, 
under  special  legislation  and  by  evasion  of  general  laws, 
consolidation  has  steadily  gone  on  until,  in  the  twelve  months 
ending  June  30,  1890,  eighty-four  companies,  representing 
over  eight  thousand  miles  of  road,  disappeared  by  consoli- 
dation or  union  with  other  companies. 

During  the  year  ending  June  30,  1891,  the  number  of 
railroad  corporations  decreased,  notwithstanding  the  new 
lines  chartered  during  the  year,  and  the  number  of  inde- 
pendent operating  roads  decreased  from  747  in  1890  to  709 
in  1891. 

During  1891,  ninety-two  companies,  representing  a total 
mileage  of  10,116  miles,  consolidated  with  existing  corpora- 
tions, either  by  purchase  or  by  some  other  form  of  merger. 

In  1890,  less  than  foity  companies,  having  an  average 


18 


2 


91 


mileage  of  over  two  thousand  miles,  operated  one  half  the 
entire  mileage  of  the  United  States  and  seventj^-five  com- 
panies received  over  eighty  per  cent  of  the  total  amount 
paid  by  the  people  of  the  United  States  for  railroad  service, 
or  nearly  $900,000,000. 

In  1891,  eighty  companies  operated  sixty-nine  and  forty- 
eight  hundredths  per  cent  of  the  total  mileage,  and  received 
$900,306,967,  or  more  than  eighty-two  per  cent  of  the 
entire  gross  earnings  of  the  railroads  of  the  country.  These 
roads  performed  about  eighty-four  per  cent  of  the  total 
passenger  service,  and  eighty-three  per  cent  of  the  total 
freight  service  during  the  3^ear. 

Under  the  coercive  effect. of  the  interstate  commerce  law, 
which  prohibits  pooling  contracts  to  prevent  ruinous  competi- 
tion, this  process  of  combination  and  consolidation  is  going 
on  with  increasing  rapidity,  and  it  is  safe  to  say  that  during 
the  present  year  not  more  than  fifty  compiuiies  will  together 
receive  for  railroad  service  nearly  one  billion  dollars. 

Xothing  could  more  conclusively  demonstrate  the  truth  of 
the  statement  by  Mr.  Stephenson  in  1830,  that  “ where  com- 
bination is  possible  competition  is  impossible,”  or  show  how^ 
inefl:ective  is  all  legislation  against  the  operation  of  business 
laws. 

Unproductive  Kailroads. 

One  of  the  most  significant  facts  shown  by  railroad  statis- 
tics in  the  United  States  is  the  amount  of  railroad  property 
of  various  classes  upon  which  no  income  is  received. 

During  the  year  1890,  63.76  per  cent  of  all  the  railroad 
tocks  paid  no  dividend,  and  for  the  year  1891,  59.64  per 
cent  paid  no  dividend. 

The  Interstate  Commerce  Commission  classify  the  rail- 
roads into  ten  different  groups. 

Groups  7,  8,  9,  and  10  comprise  all  the  railroads  west  of 


11) 


the  Mississippi  and  Missouri  Rivers,  and  have  a combined 
mileage  of  53,213  miles,  and  a combined  capital  of  $1,002,- 
525,421. 

Of  the  $113,507,688  capital  of  the  railroads  in  Group  7, 
62.39  per  cent  paid  no  dividend. 

Of  the  $332,362,779  capital  in  Group  8,  69.98  per  cent 
paid  no  dividend. 

Of  the  $413,003,230  capital  in  Group  10,  78.84  per  cent 
paid  no  dividend. 

And  of  the  $143,651,724  capital  in  Gioup  9,  99.99  per 
cent  paid  no  dividend. 

Of  the  stock  of  the  railroads  west  of  the  Mississippi  and 
Missouri  Rivers  75.69  per  cent  pays  no  income  to  the 
owners. 

During  the  first  six  months  of  the  present  year  seventeen 
railroads,  with  a ca[)ital  and  debt  of  $36,935,000,  were  sold 
under  foreclosure. 

Since  Jan.  1,  1893,  twenty-seven  companies,  with  a mileage 
of  22,141  miles,  and  stock  and  debt  of  more  than  $1,287, - 
000,000  have  passed  into  the  hands  of  receivers,  counting  the 
Northern  Pacific  and  Union  Pacific  each  as  only  one  com- 
pany. If  the  twenty-two  subordinate  lines  of  the  North- 
ern Pacific  and  the  thirty-seven  branch  lines  of  the  Union 
Pacific  be  added  the  total  number  of  companies  in  receiver- 
ship during  that  time  is  eighty-six  ; and  the  mileage  of  roads 
in  the  hands  of  receivers  is  over  nineteen  per  cent  of  the  total 
mileage  of  the  country. ^ 

Railroad  insolvency  and  receivership  is  not  confined  to 
times  of  depression  in  general  business,  but  occurs  with 
alarming  frequency  in  times  of  business  prosperity.  In 
1892,  thirty-six  companies,  with  10,508  miles  of  road  and 

1 Since  this  was  written  the  “ Atchison  System  ” has  been  put  into  receiver- 
ship, which  adds  9,344  miles  of  road  with  1102,000,000  of  stock  and  $330,082,000 
funded  debt  to  these  amounts. 


20 


$357,000,000  of  capital,  went  into  receivership  in  addition 
to  the  foreclosure  sales  of  that  year  and  during  the  seven- 
teen years  ending  with  the  year  1892,  526  railroad  com- 
panies with  a mileage  of  55,670  miles,  and  $3,122,000,000 
of  capital,  were  sold  under  foreclosure.  That  was  about 
thirty-two  per  cent  of  the  present  mileage,  and  thirty-one 
per  cent  of  the  present  capital  of  all  the  railroads. 


Interstate  Railroad  Commerce. 

The  figures  which  I have  given  are  with  relation  to  the 
railroads  of  the  United  States  as  a whole.  It  is  impossible 
to  give  any  satisfactory  statistics  with  reference  to  them  in 
any  other  aspect.  All  the  railroads  either  extend  across 
state  line  or  are  parts  of  connecting  lines  of  railroad  extend- 
ing through  ditierent  states.  It  can  safely  be  said,  I think, 
that  there  is  no  railroad  which  is  not  engaged  in  interstate 
commerce  to  some  extent,  although  its  line  may  be  wholly 
within  the  limits  of  a single  state. 

Interstate  commerce  b}^  rail  is  transportation  from  a point 
in  one  state  to  a point  in  another,  while  state  commerce  by 
rail  is  transportation  from  a point  in  one  state  to  another 
point  in  the  same  state,  but  both  kinds  of  transportation  aie 
necessarily  carried  on  over  the  same  rails  and  by  the  same 
trains,  and  it  is  impossible  to  separate  the  one  from  the 
other. 

The  interstate  commerce  is,  however,  doubtless  much  the 
larger  in  volume.  The  regulation  of  the  transaction  of  and 
the  rates  upon  either  kind  of  transportation  by  rail  neces- 
sarily affect  the  regulation  of  and  the  rates  upon  the  other. 
Railroad  transportation  is  a unit  and  cannot  be  cut  up  for 
regulation  or  supervision  into  two  separate  kinds  of  trans- 
portation, — state  and  interstate. 


The  railroads  of  the  United  States  are  so  intimately  con- 
nected, and  public  accommodation  demands  that  they  be 
operated  with  such  connections  as  to  make  them  practically 
one  system.  The  regulation  of 'one  necessarily  affects  to  a 
greater  or  less  degree  all  the  others.  The  railroads  of  one 
portion  of  the  country  are  benefited  or  injured  as  the  rail- 
roads of  other  portions  of  the  country  are  benefited  or 
injured.  Whether  it  will  ever  be  possible  to  operate  all  the 
railroads  of  the  United  States  under  uniform  regulations,  it 
is  impossible  to  say,  but  the  tendency  is  and  should  be  to 
uniformity,  so  far  as  it  is  practicable  under  the  differences  of 
local  conditions.  Where  state  supervision  and  regulation  of 
state  commerce  conflicts  with  national  supervision  and  reg- 
ulation of  interstate  commerce  it  is  ineflective  for  obvious 
legal  and  practical  reasons,  and  the  time  is  probably  not  far 
distant  when  it  will  be  a serious  question  whether  the  super- 
vision and  regulation  of  railroad  transportation,  to  be  prac- 
tical and  efficient,  must  not  be  exercised  wholly  by  the 
national  government. 


Conclusion. 

This  necessarily  imperfect  sketch  of  the  statistics  of  the 
railroads  of  the  United  States  shows  that  nearly  two  hun- 
dred thousand  miles  of  railroad  are  operated  by  private 
corporations,  which  carry  upon  them  nenrly  six  hundred 
million  persons,  and  over  seven  hundred  million  tons  of 
freight  each  twelve  months,  and  in  so  doing  collect  and 
disburse  nearly  one  billion  two  hundred  millions  of  dollars 
a year.  They  audit  their  own  accounts  of  receipts  and 
disbursements.  And  yet  it  is  estimated  that  the  cases  of 
default  or  overcharge  in  this  business  are  less  than  one 
ten-thousandth  of  one  per  cent  of  the  entire  transactions 


22 


involved,  and  the  security  to  persons  carried  is  so  great  that 
life  on  a railroad  train  is  practically  as  safe  as  life  at  home.^ 

The  charge  for  service  rendered  is  much  less  than  that  in 
, other  countries,  and  the  service  is  better  performed.  Freight 
is  carried  from  Boston  to  Chicago,  a thousand  miles,  in  less 
time  and  for  a less  price,  on  the  average,  than  ordinary 
freight  is  carried  between  London  and  Paris,  three  hundred 
miles. 

Considering  the  time  within  which  the  American  railroad 
system  has  been  created,  and  the  vast  territory  over  which 
it  extends,  the  opportunities  which  have  existed  for  dishonest 
practice  in  construction  and  management,  and  the  magni- 
tude of  the  capital  which  has  been  involved,  the  wonder  is, 
not  that  abuses  have  existed,  but  that  they  have  not  been 
greater. 

Whatever  abuses  have  existed,  and  whatever  evils  unwise 
management  may  have  produced  are  self-limited,  and  have 
brousfht  and  are  brin^in^  their  own  correction. 

It  is  easy  to  formulate  abstract  propositions  with  regard 
to  the  management  and  regulation  of  this  immense  system 
of  railroad  transportation,  and  those  who  know  the  least 
about  it  have,  of  course,  the  least  difficulty  in  so  doing. 
But  I think  that  even  a slight  examination  of  the  facts  and 
the  figures  relating  to  this  subject  will  lead  thoughtful  men 
to  perceive  that  so  complicated  a subject,  and  one  upon  the 
, proper  treatment  of  which  the  prosperity  of  the  business 
interests  of  the  country  so  much  depends,  should  be  treated 
with  wise  conservatism  and  great  caution,  so  that  in  the 
attempt  to  correct  real  or  fancied  evils  greater  evils  be  not 
created. 


’ But  one  passenger  out  of  1,600,000  is  injured. 


an?;- 


